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Criteo Reports Strong Results For The Third Quarter 2016

NEW YORK, Nov. 2, 2016 /PRNewswire/ -- Criteo S.A. (NASDAQ: CRTO), the performance marketing technology company, today announced financial results for the third quarter ended September 30, 2016.

  • Revenue increased 27% (or 25% at constant currency1) to $424 million.
  • Revenue excluding Traffic Acquisition Costs, or Revenue ex-TAC2, grew 32% (or 30% at constant currency) to $177 million, or 41.7% of revenue.
  • Net Income increased 154% to $15 million.
  • Adjusted EBITDA2 grew 55% (or 51% at constant currency) to $54 million, representing 12.6% of revenue and 30.3% of Revenue ex-TAC.
  • Adjusted Net Income per diluted share2 grew 173% to $0.48.

 

"We continue to deliver terrific results for advertisers," said Eric Eichmann, CEO. "And with the addition of HookLogic and Criteo Predictive Search, we will cover an ever increasing part of their performance marketing and become a more strategic partner." 

"We continue to deliver rapid growth and expanding profitability," said Benoit Fouilland, CFO. "Our ability to drive operating leverage while investing in the business demonstrates the scalability of our model."

 

Operating Highlights

  • We added over 1,000 net clients in Q3, a new record in Criteo's history, approaching 13,000 clients.
  • Revenue ex-TAC from existing clients, live in Q3 2015 and still live in Q3 2016, grew 15% at constant currency.
  • Close to 57% of our revenue was generated on mobile ads.
  • Users matched through our Universal Match technology generated 52% of Revenue ex-TAC, reflecting the growing adoption of our solution and the high value of matched users for advertisers.
  • Close to 7,000 advertisers are now live on dynamic ads on Facebook and Instagram.
  • On October 25, 2016, we launched Criteo Predictive Search, a groundbreaking product that brings our proven performance-based approach to the large and fast-growing Google Shopping market.

 

Acquisition of HookLogic

On October 3, 2016, Criteo signed a definitive agreement to acquire HookLogic, Inc., a New York-based company connecting many of the world's largest ecommerce retailers with consumer brand manufacturers. The acquisition of HookLogic will expand Criteo's business to brand manufacturers and will strengthen our performance marketing platform. The transaction is expected to close in the coming weeks.

 

Revenue and Revenue ex-TAC

Revenue grew 27%, or 25% at constant currency, to $424 million (Q3 2015: $333 million). Revenue ex-TAC grew 32%, or 30% at constant currency, to $177 million (Q3 2015: $134 million). This increase was primarily driven by technology innovation across all devices and platforms, the addition of a record quarterly number of clients across regions and the continued expansion of our publisher relationships.

  • In the Americas, Revenue ex-TAC grew 31%, or 31% at constant currency, to $64 million (Q3 2015: $48 million) and represented 36% of total Revenue ex-TAC.
  • In EMEA, Revenue ex-TAC grew 23%, or 27% at constant currency, to $71 million (Q3 2015: $57 million) and represented 40% of total Revenue ex-TAC.
  • In Asia-Pacific, Revenue ex-TAC grew 51%, or 34% at constant currency, to $42 million (Q3 2015: $28 million) and represented 24% of total Revenue ex-TAC.

Revenue ex-TAC margin as a percentage of revenue was 41.7% (Q3 2015: 40.2%), slightly above prior quarters and in line with our expectations.

 

Net Income and Adjusted Net Income

Net income increased 154% to $15 million (Q3 2015: $6 million). Net income available to shareholders of Criteo S.A. was  $14 million, or $0.21 per share on a diluted basis (Q3 2015: $5 million, or $0.08 per share on a diluted basis).

Adjusted Net income, defined as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration and the tax impact of these adjustments, increased 175% to $31 million, or $0.48 per share on a diluted basis (Q3 2015: $11 million, or $0.17 per share on a diluted basis). Adjusted Net income is not a measure calculated in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").

 

Adjusted EBITDA and Operating Expenses

Adjusted EBITDA grew 55%, or 51% at constant currency, to $54 million (Q3 2015: $34 million). This increase in Adjusted EBITDA is primarily the result of the strong Revenue ex-TAC performance in the quarter, as well as continued operating leverage, in particular in Sales and Operations.

Adjusted EBITDA margin as a percentage of revenue improved 230 basis points to 12.6% (Q3 2015: 10.4%) and 450 basis points as a percentage of Revenue ex-TAC to 30.3% (Q3 2015: 25.8%). While we continue to invest in R&D and innovation, this margin improvement demonstrates the scalability and operating leverage of our model.

Operating expenses increased 33% to $131 million (Q3 2015: $99 million). Operating expenses, excluding the impact of equity awards compensation expense, pension service costs, depreciation and amortization, acquisition-related costs and deferred price consideration, which we refer to as Non-GAAP Operating Expenses, increased 23% to $111 million (Q3 2015: $91 million). This increase is primarily related to the year-over-year growth in headcount in Research and Development (32%), Sales and Operations (25%) and General and Administrative (26%), as we continued to grow the organization.

Non-GAAP Operating Expenses as a percentage of revenue decreased by 100 basis points to 26.2% (Q3 2015: 27.2%) and by 480 basis points as a percentage of Revenue ex-TAC to 62.9% (Q3 2015: 67.7%).

 

Cash Flow and Cash Position

Cash flow from operating activities increased 149% to $44 million (Q3 2015: $18 million).

Free Cash Flow, defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and net of proceeds from disposal, was $24 million (Q3 2015: $(7) million), increasing by $30 million year-over-year.

Total cash and cash equivalents were $407 million as of September 30, 2016 (December 31, 2015: $354 million).

 

Business Outlook

The following forward-looking statements reflect Criteo's expectations as of November 2, 2016. We expect the HookLogic transaction to close in the coming weeks. The contribution of HookLogic is therefore not included in the following guidance for the fourth quarter and fiscal 2016.

Fourth Quarter 2016 Guidance:

  • We expect Revenue ex-TAC to be between $207 million and $210 million excluding HookLogic.
  • We expect Adjusted EBITDA to be between $72 million and $75 million excluding HookLogic.

Fiscal Year 2016 Guidance:

  • We expect Revenue ex-TAC growth to be between 33% and 34% at constant currency excluding HookLogic.
  • We expect our Adjusted EBITDA margin as a percentage of revenue to increase between 120 basis points and 140 basis points excluding HookLogic.

The above guidance for the fourth quarter 2016 assumes the following exchange rates for the main currencies having an impact on our business: a U.S. dollar-euro rate of 0.92, a U.S. dollar-Japanese yen of 105, a U.S. dollar-British pound rate of 0.78 and a U.S. dollar-Brazilian real rate of 3.2.

The above guidance assumes no acquisitions are completed during the fourth quarter ending December 31, 2016 and the fiscal year ending December 31, 2016.

Reconciliation of Revenue ex-TAC and Adjusted EBITDA guidance to the closest corresponding U.S. GAAP measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of equity awards compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our share price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future U.S. GAAP financial results.

 

Non-GAAP Financial Measures

This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the U.S. Securities and Exchange Commission (the "SEC"): Revenue ex-TAC, Revenue ex-TAC by Region, Revenue ex-TAC margin, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income per diluted share, Free Cash Flow, and Non-GAAP Operating Expenses. These measures are not calculated in accordance with U.S. GAAP.

Revenue ex-TAC is our revenue excluding Traffic Acquisition Costs ("TAC") generated over the applicable measurement period and Revenue ex-TAC by Region reflects our Revenue ex-TAC by our core geographies. Revenue ex-TAC and Revenue ex-TAC by Region are key measures used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue can provide a useful measure for period-to-period comparisons of our core business and across our core geographies. Accordingly, we believe that Revenue ex-TAC and Revenue ex-TAC by Region provide useful information to investors and the market generally in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA is our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short‑ and long-term operational plans. In particular, we believe that by eliminating equity awards compensation expense, service costs (pension), acquisition-related costs and deferred price consideration, Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Adjusted Net Income is our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, and the tax impact of these adjustments. Adjusted Net Income is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that by eliminating equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration, and the tax impact of these adjustments, Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and the market generally in understanding and evaluating our results of operations in the same manner as our management and board of directors.

Free Cash Flow is defined as cash flow from operating activities less acquisition of intangible assets, property, plant and equipment and net of proceeds from disposal. Free Cash Flow is a key measure used by our management and board of directors to evaluate the Company's ability to generate cash. Accordingly, we believe that Free Cash Flow permits a more complete and comprehensive analysis of our available cash flows.

Please refer to the supplemental financial tables provided in the appendix of this press release for a reconciliation of Revenue ex-TAC to Revenue, Revenue ex-TAC by Region to Revenue by Region, Adjusted EBITDA to Net Income, Adjusted Net Income to Net Income and Free Cash Flow to cash flow from operating activities, in each case, the most comparable U.S. GAAP measure. Our use of non-GAAP financial measures has limitations as an analytical tool, and you should not consider such non-GAAP measures in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (1) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; and (2) other companies may report Revenue ex-TAC, Revenue ex-TAC by Region, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow or similarly titled measures but calculate them differently or over different regions, which reduces their usefulness as comparative measures. Because of these and other limitations, you should consider these measures alongside our U.S. GAAP financial results, including revenue and net income.

 

Forward-Looking Statements Disclosure

This press release contains forward-looking statements, including projected financial results for the quarter ending December 31, 2016 and the fiscal year ending December 31, 2016, our expectations regarding our market opportunity and future growth prospects and other statements that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: if the HookLogic acquisition is not timely completed or not completed at all, recent growth rates not being indicative of future growth, uncertainty regarding legislative, regulatory or self-regulatory developments regarding data privacy matters, uncertainty regarding our ability to access a consistent supply of internet display advertising inventory and expand access to such inventory, the investments in new business opportunities and the timing of these investments, whether the projected benefits of acquisitions materialize as expected, the impact of competition, our ability to manage growth, potential fluctuations in operating results, our ability to grow our base of clients, uncertainty regarding international growth and expansion and our ability to manage the integration of our acquisitions, and the financial impact of maximizing Revenue ex-TAC, as well as risks related to future opportunities and plans, including the uncertainty of expected future financial performance and results and those risks detailed from time-to-time under the caption "Risk Factors" and elsewhere in the Company's SEC filings and reports, including the Company's Annual Report on Form 10-K filed with the SEC on February 29, 2016, as well as future filings and reports by the Company. Except as required by law, the Company undertakes no duty or obligation to update any forward-looking statements contained in this release as a result of new information, future events, changes in expectations or otherwise.

 

Conference Call Information

Criteo's earnings conference call will take place today, November 2, 2016, at 8:00 AM ET, 1:00 PM CET. The conference call will be webcast live on the Company's website http://ir.criteo.com and will be available for replay.

Conference call details:

  • U.S. callers:
  • International callers: 

+1 855 209 8212

+1 412 317 0788 or +33 1 76 74 05 02

Please ask to be joined into the "Criteo S.A." call.

 

About Criteo

Criteo (NASDAQ: CRTO) delivers personalized performance marketing at an extensive scale. Measuring return on post-click sales, Criteo makes ROI transparent and easy to measure. Criteo has over 2,200 employees in 30 offices across the Americas, EMEA and Asia-Pacific, serving 13,000 advertisers worldwide and with direct relationships with 17,500 publishers.

For more information, please visit www.criteo.com.







1 Growth at constant currency excludes the impact of foreign currency fluctuations and is computed by applying the 2015 average exchange rates for the relevant period to 2016 figures.

2 Revenue ex-TAC, Adjusted EBITDA and Adjusted Net Income per diluted share are not measures calculated in accordance with U.S. GAAP.

  Financial information to follow


 

CRITEO S.A.

Consolidated Statement of Financial Position

(U.S. dollars in thousands)

(unaudited)





December 31,



September 30,





2015



2016


Assets






Current assets:






    Cash and cash equivalents



$

353,537



$

407,158


    Trade receivables, net of allowances



261,581



268,097


    Income taxes



2,714



4,422


    Other taxes



29,552



45,323


    Other current assets



16,030



20,288


    Total current assets



663,414



745,288


Property, plant and equipment, net



82,482



98,353


Intangible assets, net



16,470



18,595


Goodwill



41,973



45,690


Non-current financial assets



17,184



17,453


Deferred tax assets



20,196



28,586


    Total non-current assets



178,305



208,677


Total assets



$

841,719



$

953,965


Liabilities and shareholders' equity






Current liabilities:






    Trade payables



$

246,382



$

253,938


    Contingencies



668



286


    Income taxes



15,365



7,133


    Financial liabilities - current portion



7,156



6,403


    Other taxes



30,463



35,844


    Employee - related payables



42,275



42,317


    Other current liabilities



15,531



18,383


    Total current liabilities



357,840



364,304


Deferred tax liabilities



139



752


Retirement benefit obligation



1,445



2,262


Financial liabilities - non current portion



3,272



2,933


    Total non-current liabilities



4,856



5,947


Total liabilities



362,696



370,251


Commitments and contingencies






Shareholders' equity:






Common shares, €0.025 per value, 62,470,881 and 63,760,491 shares authorized, issued and outstanding at December 31, 2015 and September 30, 2016, respectively.



2,052



2,087


Additional paid-in capital



425,220



470,871


Accumulated other comprehensive (loss)



(69,023)



(57,902)


Retained earnings



116,076



158,945


Equity - attributable to shareholders of Criteo S.A.



474,325



574,001


Non-controlling interests



4,698



9,713


Total equity



479,023



583,714


Total equity and liabilities



$

841,719



$

953,965


 

CRITEO S.A.

Consolidated Statement of Income

(U.S. dollars in thousands, except share and per share data)

(unaudited)




Three Months Ended




Nine Months Ended





September 30,




September 30,





2015



2016



YoY
Change


2015



2016



YoY
Change














Revenue


$

332,674



$

423,867



27

%


$

926,152



$

1,232,321



33

%














Cost of revenue













Traffic acquisition cost


(198,970)



(247,310)



24

%


(552,097)



(727,034)



32

%

Other cost of revenue


(17,206)



(22,332)



30

%


(44,418)



(60,950)



37

%














Gross profit


116,498



154,225



32

%


329,637



444,337



35

%














Operating expenses:













Research and development expenses


(22,442)



(30,701)



37

%


(60,141)



(88,097)



46

%

Sales and operations expenses


(56,310)



(68,164)



21

%


(169,120)



(201,862)



19

%

General and administrative expenses


(19,915)



(32,492)



63

%


(57,865)



(85,839)



48

%

Total Operating expenses


(98,667)



(131,357)



33

%


(287,126)



(375,798)



31

%

Income from operations


17,831



22,868



28

%


42,511



68,539



61

%

Financial income (expense)


(6,650)



(570)



(91)

%


(5,276)



(1,982)



(62)

%

Income before taxes


11,181



22,298



99

%


37,235



66,557



79

%

Provision for income taxes


(5,388)



(7,574)



41

%


(13,896)



(19,968)



44

%

Net Income


$

5,793



$

14,724



154

%


$

23,339



$

46,589



100

%














Net income available to shareholders of Criteo S.A.


$

5,096



$

13,539





$

21,618



$

42,869




Net income available to non-controlling interests


$

697



$

1,185





$

1,721



$

3,720

















Weighted average shares outstanding used in computing per share amounts:













Basic


62,082,110



63,628,351





61,662,308



63,163,922




Diluted


65,254,238



65,816,422





65,095,690



65,429,757

















Net income allocated to shareholders of Criteo S.A. per share:













Basic


$

0.08



$

0.21





$

0.35



$

0.68




Diluted


$

0.08



$

0.21





$

0.33



$

0.66




 

CRITEO S.A.

Consolidated Statement of Cash Flows

(U.S. dollars in thousands)

(unaudited)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2015



2016



2015



2016


Net income


$

5,793



$

14,724



$

23,339



$

46,589


Adjustments to reconcile to cash from operating activities


23,155



36,609



62,685



96,235


                 - Amortization and provisions


13,236



16,030



32,436



45,555


                 - Equity awards compensation expense (1)


4,600



13,965



16,242



30,030


                 - Net gain or loss on disposal of non-current assets


59



1



85



1


                 - Interest accrued


2



(972)



9



608


                 - Non-cash financial income and expenses


(130)



11



17



29


                 - Change in deferred taxes


(979)



(3,121)



(3,149)



(7,545)


                 - Income tax for the period


6,367



10,695



17,045



27,557


Changes in working capital requirement


(7,120)



4,576



(2,341)



(22,860)


                 - (Increase)/decrease in trade receivables


(14,795)



(2,160)



(27,434)



(4,528)


                 - Increase/(decrease) in trade payables


11,899



11,218



39,518



(3,931)


                 - (Increase)/decrease in other current assets


(8,781)



(2,856)



(24,664)



(18,633)


                 - Increase/(decrease) in other current liabilities


4,557



(1,626)



10,239



4,232


Income taxes paid


(4,328)



(12,278)



(13,237)



(38,152)


CASH FROM OPERATING ACTIVITIES


17,500



43,631



70,446



81,812


Acquisition of intangible assets, property, plant and equipment


(21,514)



(15,792)



(62,671)



(54,970)


Change in accounts payable related to intangible assets, property, plant and equipment


(2,551)



(4,115)



7,396



570


FREE CASH FLOW


(6,565)



23,724



15,171



27,412


Payments for acquired business, net of cash acquired


(476)





(20,551)



(5,074)


Change in other non-current financial assets


(1,049)



(377)



(6,292)



197


CASH USED FOR INVESTING ACTIVITIES


(25,590)



(20,284)



(82,118)



(59,277)


Issuance of long-term borrowings


790



739



3,183



3,798


Repayment of borrowings


(1,484)



32



(6,130)



(5,416)


Proceeds from capital increase


3,575



1,600



10,009



17,182


Change in other financial liabilities




(25)



(1,000)



(196)


CASH FROM FINANCING ACTIVITIES


2,881



2,346



6,062



15,368











CHANGE IN NET CASH AND CASH EQUIVALENTS


(5,209)



25,693



(5,610)



37,903


Net cash and cash equivalents at beginning of period


321,109



377,407



351,827



353,537


Effect of exchange rates changes on cash and cash equivalents


(1,256)



4,058



(31,573)



15,718


Net cash and cash equivalents at end of period


$

314,644



$

407,158



$

314,644



$

407,158




(1) out of which $13.1 million and $28.6 million was share-based compensation expense according to ASC 718 - Compensation - stock compensation for the quarter ended and year to date September 30, 2016, respectively.

 

CRITEO S.A.

Reconciliation of Revenue ex-TAC by Region to Revenue by Region

(U.S. dollars in thousands)

(unaudited)





Three Months Ended






Nine Months Ended








September 30,






September 30,






Region


2015



2016



YoY
Change


YoY
Change at
Constant
Currency


2015



2016



YoY Change


YoY
Change at
Constant
Currency

Revenue


















Americas


$

124,024



$

160,739



30

%


29

%


$

335,520



$

464,435



38

%


40

%


EMEA


137,185



157,921



15

%


19

%


396,200



471,226



19

%


22

%


Asia-Pacific


71,465



105,207



47

%


30

%


194,432



296,660



53

%


42

%


Total


332,674



423,867



27

%


25

%


926,152



1,232,321



33

%


33

%



















Traffic acquisition costs
















Americas


(75,684)



(97,239)



28

%


28

%


(203,781)



(284,728)



40

%


41

%


EMEA


(79,710)



(87,092)



9

%


13

%


(231,023)



(265,097)



15

%


17

%


Asia-Pacific


(43,576)



(62,979)



45

%


27

%


(117,293)



(177,209)



51

%


40

%


Total


(198,970)



(247,310)



24

%


22

%


(552,097)



(727,034)



32

%


31

%



















Revenue ex-TAC


















Americas


48,340



63,500



31

%


31

%


131,739



179,707



36

%


38

%


EMEA


57,475



70,829



23

%


27

%


165,177



206,129



25

%


27

%


Asia-Pacific


27,889



42,228



51

%


34

%


77,139



119,451



55

%


45

%


Total


$

133,704



$

176,557



32

%


30

%


$

374,055



$

505,287



35

%


35

%



(1) We define Revenue ex-TAC as our revenue excluding traffic acquisition costs generated over the applicable measurement period. Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region are not measures calculated in accordance with U.S. GAAP. We have included Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region in this Form 8-K because they are key measures used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of TAC from revenue and review of these measures by region can provide useful measures for period-to-period comparisons of our core business. Accordingly, we believe that Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region has limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) other companies, including companies in our industry which have similar business arrangements, may address the impact of TAC differently; (b) other companies may report Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region or similarly titled measures but define the regions differently, which reduces their effectiveness as a comparative measure; and (c) other companies may report Revenue ex-TAC or similarly titled measures but calculate them differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Revenue ex-TAC and Revenue, Traffic Acquisition Costs and Revenue ex-TAC by Region alongside our other U.S. GAAP financial results, including revenue. The above table provides a reconciliation of revenue ex-TAC to revenue and revenue ex-TAC by region to revenue by region.

 

CRITEO S.A.

Reconciliation of Adjusted EBITDA to Net Income

(U.S. dollars in thousands)

(unaudited)



Three Months Ended


Nine Months Ended


September 30,


September 30,


2015



2016



2015



2016


Net income

$

5,793



$

14,724



$

23,339



$

46,589


Adjustments:








Financial (income) expense

6,650



570



5,276



1,982


Provision for income taxes

5,388



7,574



13,896



19,968


Equity awards compensation expense

4,600



13,965



16,242



30,030


Research and development

$

1,714



$

4,667



$

4,354



$

9,248


Sales and operations

1,715



5,143



8,072



11,021


General and administrative

1,171



4,155



3,816



9,761


Pension service costs

110



132



332



392


Research and development

41



55



123



160


Sales and operations

37



38



115



107


General and administrative

32



39



94



125


Depreciation and amortization expense

11,892



14,771



30,598



40,588


Cost of revenue

8,503



10,406



21,287



27,846


Research and development

1,690



1,640



4,811



5,105


Sales and operations

1,330



1,813



3,434



5,604


General and administrative

369



912



1,066



2,033


Acquisition-related costs



1,793





1,941


General and administrative



1,793





1,941


Acquisition-related deferred price consideration

54



3



278



88


Research and development

54



3



278



88


Total net adjustments

28,694



38,808



66,622



94,989


Adjusted EBITDA (1)

$

34,487



$

53,532



$

89,961



$

141,578



(1)  We define Adjusted EBITDA as our consolidated earnings before financial income (expense), income taxes, depreciation and amortization, adjusted to eliminate the impact of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration. Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted EBITDA because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, pension service costs, acquisition-related costs and deferred price consideration in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; and (e) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside our U.S. GAAP financial results, including net income.

 

CRITEO S.A.

 Detailed Information on Selected Items

(U.S. dollars in thousands)

(unaudited)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2015



2016



2015



2016


Equity awards compensation expense









Research and development


$

1,714



$

4,667



$

4,354



$

9,248


Sales and operations


1,715



5,143



8,072



11,021


General and administrative


1,171



4,155



3,816



9,761


                Total equity awards compensation expense


4,600



13,965



16,242



30,030











Pension service costs









Research and development


41



55



123



160


Sales and operations


37



38



115



107


General and administrative


32



39



94



125


                                     Total pension service costs


110



132



332



392











Depreciation and amortization expense









Cost of revenue


8,503



10,406



21,287



27,846


Research and development


1,690



1,640



4,811



5,105


Sales and operations


1,330



1,813



3,434



5,604


General and administrative


369



912



1,066



2,033


                Total depreciation and amortization expense


11,892



14,771



30,598



40,588











Acquisition-related costs









General and administrative




1,793





1,941


                Total acquisition-related costs




1,793





1,941











Acquisition-related deferred price consideration









Research and development


54



3



278



88


                Total acquisition-related deferred price consideration


$

54



$

3



$

278



$

88


 

CRITEO S.A.

Reconciliation of Adjusted Net Income to Net Income

(U.S. dollars in thousands except share and per share data)

(unaudited)




Three Months Ended


Nine Months Ended



September 30,


September 30,



2015



2016



2015



2016











Net income


$

5,793



$

14,724



$

23,339



$

46,589


Adjustments:









Equity awards compensation expense


4,600



13,965



16,242



30,030


Amortization of acquisition-related intangible assets


1,200



943



3,794



3,145


Acquisition-related costs




1,793





1,941


Acquisition-related deferred price consideration


54



3



278



88


Tax impact of the above adjustments


(274)



(129)



(830)



(516)


Total net adjustments


5,580



16,575



19,484



34,688


Adjusted net income (1)


$

11,373



$

31,299



$

42,823



$

81,277











Weighted average shares outstanding









 - Basic


62,082,110



63,628,351



61,662,308



63,163,922


 - Diluted


65,254,238



65,816,422



65,095,690



65,429,757











Adjusted net income per share









 - Basic


$

0.18



$

0.49



$

0.69



$

1.29


 - Diluted


$

0.17



$

0.48



$

0.66



$

1.24




(1) We define Adjusted Net Income as our net income adjusted to eliminate the impact of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration and the tax impact of the foregoing adjustments. Adjusted Net Income is not a measure calculated in accordance with U.S. GAAP. We have included Adjusted Net Income because it is a key measure used by our management and board of directors to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, we believe that the elimination of equity awards compensation expense, amortization of acquisition-related intangible assets, acquisition-related costs and deferred price consideration,  and the tax impact of the foregoing adjustments in calculating Adjusted Net Income can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted Net Income provides useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management and board of directors. Our use of Adjusted Net Income has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (a) Adjusted Net Income does not reflect the potentially dilutive impact of equity-based compensation or the impact of certain acquisition related costs; and (b) other companies, including companies in our industry, may calculate Adjusted Net Income or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted Net Income alongside our other U.S. GAAP-based financial results, including net income.

 

CRITEO S.A.

Constant Currency Reconciliation

(U.S. dollars in thousands)

(unaudited)




Three Months Ended




Nine Months Ended





September 30,




September 30,





2015



2016



YoY
Change


2015



2016



YoY
Change

Revenue as reported


$

332,674



$

423,867



27

%


$

926,152



$

1,232,321



33

%

Conversion impact U.S. dollar/other currencies




(7,986)







(4,186)




Revenue at constant currency (1)


$

332,674



$

415,881



25

%


$

926,152



$

1,228,135



33

%














Traffic acquisition costs as reported


(198,970)



(247,310)



24

%


(552,097)



(727,034)



32

%

Conversion impact U.S. dollar/other currencies




4,997







3,210




Traffic Acquisition Costs at constant currency (1)


$

(198,970)



$

(242,313)



22

%


$

(552,097)



$

(723,824)



31

%














Revenue ex-TAC (2) as reported


133,704



176,557



32

%


374,055



505,287



35

%

Conversion impact U.S. dollar/other currencies




(2,989)







(976)




Revenue ex-TAC (2) at constant currency (1)


$

133,704



$

173,568



30

%


$

374,055



$

504,311



35

%

Revenue ex-TAC (2)/Revenue as reported


40

%


42

%




40

%


41

%
















Other cost of revenue as reported


(17,206)



(22,332)



30

%


(44,418)



(60,950)



37

%

Conversion impact U.S. dollar/other currencies




251







266




Other cost of revenue at constant currency (1)


$

(17,206)



$

(22,081)



28

%


$

(44,418)



$

(60,684)



37

%














Adjusted EBITDA (3)


34,487



53,532



55

%


89,961



141,578



57

%

Conversion impact U.S. dollar/other currencies




(1,296)







(1,409)




Adjusted EBITDA (3) at constant currency (1)


$

34,487



$

52,236



51

%


$

89,961



$

140,169



56

%



(1) Information herein with respect to results presented on a constant currency basis is computed by applying prior period average exchange rates to current period results. We have included results on a constant currency basis because it is a key measure used by our management and Board of Directors to evaluate operating performance. Management reviews and analyzes business results excluding the effect of foreign currency translation because they believe this better represents our underlying business trends. The table above reconciles the actual results presented in this section with the results presented on a constant currency basis.


(2)  Revenue ex-TAC is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Revenue ex-TAC by Region to Revenue by Region" for a reconciliation of Revenue Ex-TAC to revenue.


(3) Adjusted EBITDA is not a measure calculated in accordance with U.S. GAAP. See the table entitled "Reconciliation of Adjusted EBITDA to Net Income" for a reconciliation of Adjusted EBITDA to net income.

 

CRITEO S.A.

Information on Share Count

(unaudited)




Nine Months Ended



September 30,



2015



2016


Shares outstanding as at January 1,


60,902,695



62,470,881


Weighted average number of shares issued during the period


759,613



693,041


Basic number of shares - Basic EPS basis


61,662,308



63,163,922


Dilutive effect of share options, warrants, employee warrants - Treasury method


3,433,382



2,265,835


Diluted number of shares - Diluted EPS basis


65,095,690



65,429,757







Shares outstanding as at September 30,


62,249,428



63,760,491


Total dilutive effect of share options, warrants, employee warrants


6,582,870



8,165,801


Fully diluted shares as at September 30,


68,832,298



71,926,292


 

CRITEO S.A.


Supplemental Financial Information and Operating Metrics


(U.S. dollars in thousands except where stated)


(unaudited)





Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

 2016

Q2

 2016

Q3

 2016

YoY

Change

QoQ
Change














Clients

7,190

7,832

8,564

9,290

10,198

10,962

11,874

12,882

39%

8%














Revenue

294,489

294,172

299,306

332,674

397,018

401,253

407,201

423,867

27%

4%


Americas

109,543

100,624

110,872

124,024

170,133

147,174

156,522

160,739

30%

3%


EMEA

131,275

132,208

126,807

137,185

144,905

159,405

153,899

157,921

15%

3%


APAC

53,671

61,340

61,627

71,465

81,980

94,674

96,780

105,207

47%

9%














TAC

(172,538)

(175,888)

(177,239)

(198,970)

(237,056)

(238,755)

(240,969)

(247,310)

24%

3%


Americas

(66,774)

(61,244)

(66,853)

(75,684)

(104,646)

(90,929)

(96,560)

(97,239)

28%

1%


EMEA

(73,264)

(78,158)

(73,155)

(79,710)

(82,905)

(91,185)

(86,820)

(87,092)

9%

—%


APAC

(32,500)

(36,486)

(37,231)

(43,576)

(49,505)

(56,641)

(57,589)

(62,979)

45%

9%














Revenue ex-TAC

121,951

118,284

122,067

133,704

159,962

162,498

166,232

176,557

32%

6%


Americas

42,769

39,380

44,019

48,340

65,487

56,245

59,962

63,500

31%

6%


EMEA

58,011

54,050

53,652

57,475

62,000

68,220

67,079

70,829

23%

6%


APAC

21,171

24,854

24,396

27,889

32,475

38,033

39,191

42,228

51%

8%














Cash flow from operating activities

51,170

41,007

11,938

17,500

66,706

18,907

19,274

43,631

149%

126%



Capital expenditures

12,562

12,862

18,348

24,066

19,205

12,109

22,386

19,907

(17)%

(11)%



Net cash position

351,827

316,376

321,109

314,644

353,537

386,110

377,407

407,158

29%

8%



Days Sales Outstanding (days - end of month) (1)






56

57

56







(1)  Due to the conversion from IFRS (euros) to U.S. GAAP (U.S. dollars), the Days Sales Outstanding for historic quarters has not been recalculated and is not available.

 

SOURCE Criteo S.A.

For further information: Criteo Investor Relations, Edouard Lassalle, Head of IR, e.lassalle@criteo.com, Friederike Edelmann, Sr. Manager IR, f.edelmann@criteo.com; Criteo Public Relations, Emma Ferns, Global PR director, e.ferns@criteo.com